You can earn a lot of profit from the transport and logistics business, given the fact that you start the right way as it is also highly competitive. An entire process must be followed, including a BOC3 filing, applying for FMCSA certification, etc.
Many eco entrepreneurs try to get into the transport and logistics business, but they end up failing due to a lack of knowledge and abilities. That said, building a successful transport and logistics business requires more than just choosing faster delivery routes.
Read on to learn more about some essential tips to implement your business strategy to boost your transport and logistics business. It’s big business.
Use a Suitable Shipping Method
As an owner of a transport and logistics business, you should be familiar with two basic shipping methods: LTL (less than truckload) and FTL (full truckload). If you have recently started your business, selecting the right shipping method can be a bit tricky. You will need to know the essential difference between the two shipping methods.
What is LTL (Less Than Truckload)?
The LTL shipping method incorporates different shipments from different clients. Typically, the clients only pay for the shipment based on the weight or storage space. If the goods only take up 1/3rd of the storage, the clients will only pay for 1/3rd of the truck.
If you have loads of clients and operating on a small scale, you should go for LTL as you will be shipping goods only in small quantities. You might have to undergo frequent stops and hence reach your destinations by taking a bit more time.
The LTL shipping method runs the risk of fulfillment errors due to receiving loads of goods from different shippers. That said, make sure that your courier is extremely careful with managing all shipments with the LTL shipping method.
What is FTL (Full Truckload Shipping)?
The FTL shipping method incorporates ground freight transportation. This method allows a company to ship their items using the entire space irrespective of the number of goods loaded in the truck. Hence, while incorporating the FTL shipping method, the company is required to pay for the entire truck.
Based on the weight and amount of the cargo, most transport and logistics businesses have trucks of different types and sizes to fit according to the companies’ needs. If your transport and logistics business is associating with bigger companies that ship in larger quantities, you should go for the FTL shipping method. Among the basic advantages of this shipping method are faster delivery times and a greater level of security. However, the shipping costs with FTL are prone to be higher than that of LTL.
Which Shipping Method Should You Choose?
After getting familiar with FTL and LTL, we are left with the pending question about which shipping method is best for you. To determine this, you will need to assess your potential clients and what type of items you would normally be shipping. Also, you will be assessing your fleet, i.e., how many transports you have.
If your clientele includes various company sizes, you have the option of combining both methods (FTL and LTL). However, you must ensure that your fleet of transportation comprises different types of trucks to fulfill your different clients’ demands.
This handy guide (links to PDF) from MIT helps you figure out what method fits your lowest carbon footprint. It’s not simple matgh.
Setting the Right Rate
Your charging rate determines the profit that you are more likely to get. The thumb rule is to keep the rate high enough to make sufficient profit while covering your operating costs. On the other hand, the rate shouldn’t be too high without providing Value to your clients as this will cause you to lose from your potential competitors.
The following factors help in determining the right rate for shipping services:
· Transportation Type
· Shipping Method – FTL or LTL
· Amount & Weight of the Cargo
· Types of Items and Goods to Ship
· Distance & Time
· Shipping Routes
· Insurance (if any)
· Added Value (shipment tracking app, shorter shipping times, etc.)
Assess and Control Your Operating Costs
For the success of your transportation and logistics business, it is crucial to understand your operating costs. Have a thorough understanding of your variable and fixed costs, your potential profits, and losses. Your fixed costs include insurance permits and driver salaries, whereas your variable costs include fleet maintenance and fuel costs.